How To Calculate Your Marketing Costs

September 19, 2013

Many people think that the cost of their marketing campaign is just the dollar amount of the cost to have the marketing message go up on whatever platform it is meant to live on. But that is not the correct way to think about the costs of the marketing efforts. The way to think about the costs of the marketing campaign is to add the 1) dollar costs to post the message 2) employee salaries to execute the marketing campaign, and 3) the cost of the time that it takes for the marketing effort to begin bringing in clients.
Here is a video explaining this in more detail:

Customer Acquisition Costs

In addition to understanding the ramifications of not getting clients and how that can adversely affect your business, there is another concept at play here. And that is the customer acquisition cost. Some marketing techniques enable you to measure your customer acquisition costs, and with other marketing techniques it is a little bit more difficult to measure your true marketing costs. But if you can, always try to measure your customer acquisition costs. Here is a tutorial on direct marketing explaining how you can measure your customer acquisition costs and the benefits of doing so.

And here is a tutorial on the importance of web analytics to track the results of your marketing efforts.

After You Understand Customer Acquisition Costs, Measure LTV

Once you understand the marketing costs to acquire a client, the next important metric for your business is how much profit that customer can bring you. The term for that is the lifetime customer value abbreviated by LTV. Here is a tutorial on how to calculate your customer lifetime value.

If your marketing costs per customer are lower than your customer lifetime value, then you can increase spending on that particular marketing technique because you will know that this will also increase your profits.

Paid Marketing

Many people assume that free marketing is free, but it actually costs money in terms of the time that is takes to actually begin getting clients from those free marketing efforts. Free marketing is great, but quite often, it does take months of effort before any real fruits of that labor begin to come. In contrast, if you do paid marketing, you can get clients immediately because you are paying to get that traffic. Take a look at our tutorial about how to do paid marketing effectively.